16 May 2012
How German Companies are Successfully Selling to China
“Oetker is serving pizza to Chinese consumers” was a recent press headline. The German food conglomerate started producing microwave pizzas in Taicang for Chinese consumers, who generally have microwaves instead of baking ovens. This example illustrates how important product customisation for the Chinese market has become.
German cars become more Chinese
Meeting customer requirements has also been one of the key success factors in the automotive industry, as Audi’s A6 and new A4 long-wheelbase versions (built in China) perfectly illustrates. By understanding particular characteristics – the majority of Audi cars are chauffeur driven in China – the start of 2012 saw Audi’s most successful quarter ever in China with a 40% year-on-year increase. The Volkswagen Group is another strong case-in-point as they are the first foreign car manufacturer truly have regional production coverage. Beginning in 1985 in Shanghai, Volkswagen later added production sites in the Northeast (Changchun, Dalian) and in the West (Chengdu). And from 2014 onwards Volkswagen will cover the South by setting up a plant in Foshan capable of producing 300,000 units. This will significantly help the Guangdong Province achieve their policy strategy to move away from cheap and labour-intensive consumables such as toys and textiles to higher value industrial products.
One sales strategy doesn’t fit all
Those who simplify their products for the less mature Chinese market are successful, but also high tech companies who offer the latest technology have done well. Successful market approach is determined by the strength of local competition and demand patterns (and the related price points), which can differ substantially between East and West China.
While the environment is continuously evolving, two major factors/challenges for sales remain unchanged:
- The size of the country – the distance between Beijing to Guangzhou (1,900km) is equal to that of Denmark and Italy.
- The cultural differences and dialects – there are over 55 ethnic minority groups in China. Many companies divide the country geographically according to purchase patterns and income potential. Ensuring local production and proximity to customers has up to now guaranteed success, and so the logical consequence for many of these companies is to follow the theme ‘Design in China – Make in China – Sell in China’. This recent shift of gravity towards China and the increasing need for independence of the local subsidiary brings new internal challenges ahead. Chemical giant BASF recently announced a major transition of moving the global headquarters of its Dispersions & Pigments division to Hong Kong and plans “to change the perspective from which we view our customer industries” said Dr. Markus Kramer, President of BASF’s Dispersions & Pigments division.
Ready to sell in China?
Customer understanding and support are paramount for the success of German companies in China, particularly given that many typical ‘Mittelstand’ companies have products that require complicated explanation. The Print division of the German industrial company Heidelberg has set up a ‘Print Media Academy’ in Shenzhen where customers and staff can be trained on how to use their equipment. A growing percentage of mid-market companies now achieve a third or more of their global sales in China. The guiding principle for success in China for now and in future is to regard China not as one but a multitude of markets where developments progress at different speeds and with individual characteristics. This means that instead of remote sales or one office covering sales nationwide, a combination of regional sales offices, home offices and telephone hotlines supported by strong internet sales and product support is a more effective strategy. The company’s speed of change to cope with China’s diversity and new markets is ultimately the determining success factor.
For more information, please contact Fiducia Management Consultants at contact@fiducia-china.com.
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